Carbon tax calibration undertaken to protect business competitiveness
The Singapore government’s cautious signal is a recognition that most of the rest of the world is putting the brakes on decarbonisation at the moment
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[SINGAPORE] In a Budget short on initiatives and handouts for sustainability and environmental, social and governance (ESG) issues, Singapore’s 2026 fiscal plan instead struck a note of caution on how quickly the country can decarbonise.
The key message on sustainability in Prime Minister Lawrence Wong’s Budget speech was that Singapore will calibrate its approach towards decarbonisation to maintain a credible transition, but not at the expense of international competitiveness.
While stating that “retreating from action is not an option” for Singapore, PM Wong said: “While Singapore will continue to contribute responsibly to climate action, we recognise that our actions alone cannot determine global outcomes.
“We will therefore calibrate our moves cautiously – doing our part to reduce emissions as a responsible global citizen, while taking into account what other countries are doing, in order not to put ourselves at a competitive disadvantage.”
That stance will directly affect future rates for Singapore’s carbon tax, which is currently set at S$45 per tonne of emissions until 2027, with existing guidance for the rate to increase to between S$50 and $80 per tonne by 2030.
PM Wong said that Singapore is assessing the trajectory “carefully”, noting that the Republic already has the highest carbon tax rate in Asia.
“If global climate momentum continues to weaken, we may need to position ourselves towards the lower end of the S$50 to S$80 per tonne range by 2030,” he added.
In terms of clean energy, Singapore is raising its solar deployment target to 3 gigawatt-peak by 2030, having already reached the earlier goal of 2 gigawatt-peak ahead of schedule.
Support for businesses comprises extensions of the existing Energy Efficiency Grant and the Enterprise Financing Scheme, which includes green loans within its scope.
The Singapore government’s calibration signal is a recognition that most of the rest of the world is putting the brakes on decarbonisation at the moment.
Furthermore, heightened short-term global risks and uncertainties have understandably lowered climate action among national priorities.
Given the importance of trade for Singapore’s economy, it’s reasonable to argue that being too aggressive on carbon pricing could hurt businesses and workers.
On their own, Singapore’s domestic emissions will not make much of an impact on global emissions and climate change.
However, there are important strategic reasons for Singapore to maintain a credible climate strategy.
Economically, credibility helps to position Singapore as a hub for the growing global green economy. Investments in protecting natural assets and in climate adaptation build defences against the negative impacts of climate change.
The strategic reality is that Singapore can probably get by without having to actually achieve timely net-zero emissions; it just has to do so ahead of its potential competitors.
Nevertheless, over the long term Singapore cannot count on always being able to adjust climate policies to fit what others are doing.
That could create too much uncertainty for businesses, especially for long-term projects. For instance, certain renewable energy solutions could depend on appropriate carbon pricing to ensure competitiveness against fossil fuels.
As Singapore pushes forward with its decarbonisation journey, it’s critical that the country better insulate its economy and its climate strategy from policy turbulence elsewhere. That should include growing the share of the green sector in the economy, and more rapidly greening the country’s energy sources.
Singapore’s caution on the pace of carbon pricing may be appropriate in the short term, but that should be coupled with continued, aggressive investments in building a greener economy to secure the long term.
For more of BT’s Budget 2026 coverage, go to bt.sg/budget26
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